155. ADMINISTRATIVE DIFFICULTIES CONFRONTING SOCIALISM.—Under socialism the work of government would be greatly increased. Thousands of intricate administrative rules would have to be drawn up for the control and direction of activities now attended to by individuals animated by personal interest.

Now, it is seriously to be questioned whether the most highly centralized government could effectively administer the innumerable activities of our complex industrial life. Upon what basis would land be distributed? How would individuals be apportioned among the various employments? Upon what basis would the wages of millions of workmen be determined? Could so mechanical an agency as government foresee future business conditions expertly enough to direct the productive forces of the nation effectively? If prices are no longer to be fixed by competition, how, and by means of what agency, are they to be determined?

These are only a few of the vital questions which would arise in connection with the administration of a socialist state. Various suggestions have been made with regard to some of these difficulties, but there is among socialists no general agreement as to the answer of any one of these questions. They continue to constitute, in the eyes of practical men, a grave obstacle to socialism.

156. DANGERS OF A SOCIALIST BUREAUCRACY.—Governmental power would have to be very highly centralized if a socialist state were effectively to administer the nation's economic activities as a unit. But this very concentration of power might easily result in the development of a bureaucracy. Waste and the possibility of corruption have unfortunately characterized even those governments over which the people exercise considerable control; it seems probable that the greater centralization of authority demanded by socialism would increase rather than decrease these dangers.

It is to be noted here that the socialists, who might be supposed to consider as paramount the interests of society or of the public, are the very people who are least inclined to do anything of the kind. [Footnote: This concept was suggested to me by Professor Thomas Nixon Carver of Harvard University.] Socialists look upon the state only as an agency for benefiting particular groups of individuals. The emphasis of political socialism upon class struggle, the frank admissions of the I.W.W. that they seek to suppress all but the laboring class, and the establishment by the bolshevists of a dictatorship of the proletariat, all these facts indicate that socialists seek the welfare of particular groups rather than the welfare of the general public.

But class legislation is repugnant to the principles of American democracy. We believe in government by the masses and for the masses; furthermore, we are committed to the ideal of as much individual freedom and as little governmental compulsion as is compatible with the good of both individual and community. The concept of a socialist bureaucracy, administered in the interests of particular groups, runs counter to our fundamental beliefs and ideals.

157. SOCIALISM WOULD DESTROY PERSONAL INITIATIVE.—One of the strongest arguments against socialism is that it would destroy personal initiative. Socialism runs counter to human nature by under- valuing the principle of self-interest. Economists are generally agreed that the abolition of the institution of private property would cause the ambition of the individual to slacken. In spite of its defects, it is the competitive system, with its promise of reward to the energetic and the capable, which is largely responsible for the miraculous prosperity of modern times. Men ordinarily will not undergo systematic training, perfect inventions, strive to introduce greater and greater economies into their business, or undertake the risk of initiating new enterprises, unless they are assured that they will be able to enjoy the fruits of their labor.

And not only would socialism discourage ambition by abolishing private enterprise, but it might encourage inefficiency and shiftlessness. Every man would be guaranteed a job, every individual would be protected against want. It is even likely that a socialist state would undertake to rear and provide for the offspring of its citizens. Human experience indicates that this degree of paternalism would encourage laziness and increase irresponsibility.

It is sometimes said that under socialism men would work as eagerly for social esteem as they now work for financial gain. This would be a highly desirable condition, but unfortunately there is nothing in human experience to justify the hope that such a state of affairs will speedily be realized. The spread of altruism in the modern world is heartening, but no sensible person will shut his eyes to the fact that, for the immediate future at least, self-interest promises to be much more widespread than altruism. The love of gain may not be the highest motive in life, but it is better than none, and for a long time to come it will probably be the one which appeals most strongly to the average man. Socialists and non-socialists alike deplore the domination which self-interest exercises over human affairs. But whereas the non-socialist wisely tries to adapt a program of industrial reform to this hard fact, many socialists appear to believe that because the principle of self-interest often works out badly, they ought to act as though that principle did not exist.

158. SOCIALIST THEORY OF DISTRIBUTION UNSOUND.—Both socialists and non-socialists admit that poverty is an undesirable condition. But over the method of improving the condition of the poor the socialist and the non-socialist disagree. The defender of capitalism begins by pointing out that, under competitive conditions, the unskilled laborer is poor primarily because his labor is not highly productive. The socialist ignores this fact, and insists that the laborer shall receive a share of wealth which shall be adequate to his needs. As we shall have occasion to point out in the next chapter, this attitude of the socialist indicates a fundamental defect in his theory. Socialism pays more attention to who shall eat and how much shall be eaten, than it does to the more fundamental question of how food is to be produced, and how much can actually be produced. Laws may oblige an employer to give his workmen twice as much as they add to the value of his product, but though this will benefit the workmen while it lasts, such a practice would, if widely adopted, lead to industrial bankruptcy. [Footnote: It is assumed, in this section, that the productivity of the laborer is determined from the point of view of the employer. This is in accordance with the productivity theory which was discussed in Chapter IX.]

159. SOCIALIST THEORY OF VALUE UNSOUND.—Many of the defects of the socialist doctrine are traceable to the fact that it rests upon false assumptions. One of these false assumptions is that commodities have value in proportion as labor has been expended upon them. This labor theory of value has been discarded by every authoritative economist of modern times. As has been pointed out in Chapter VIII, value depends upon scarcity and utility. The soundness of the scarcity-utility theory, as well as the unsoundness of the labor theory, may be brought out with reference to three classes of goods.

First, there are commodities which have value in spite of the fact that no labor has been expended upon them. Virgin land, the gift of Nature, is the most important example. Articles of this class have value because they satisfy men's wants, i.e. have utility, and because they are scarce. Labor has nothing to do with their original value.

Second, there are commodities which have no value, even though much labor has been expended upon them. A building erected in a desert or in a wilderness is an example. Unwanted books, or paintings by unknown artists are other examples. Commodities in this class may represent a great expenditure of labor, and still have no value, first because they do not satisfy anyone's wants, and second because they are not scarce, i.e. there are not fewer of them than are wanted.

Third, articles may have a value which is out of proportion to the amount of labor expended upon them. The value of diamonds, old coins, and rare paintings is disproportionate to the actual amount of labor involved in their production. A sudden change in fashion may cause the value of clothing and other commodities to rise or fall, with little or no regard for the amount of labor expended upon them. In each case it is not labor that determines value, but scarcity and utility.

160. LABOR NOT THE ONLY FACTOR IN PRODUCTION.—Labor is an important factor in production, but land, capital, coÖrdination, and government are also of vital importance to any modern industrial community. The great error of the socialist is that he over-estimates the importance of the laborer, and minimizes or altogether denies the importance of the individuals with whom the laborer coÖperates in production. This error is explainable: the laborer does most of the visible and physical work of production, while the part played by the landowner, the capitalist, and the entrepreneur is less physical and often is apparently less direct. The complexity of the industrial mechanism very often prevents the laborer from appreciating the true relation existing between his own physical labor, and the apparently indirect and often non-physical efforts of those who coÖperate with him. It is in this connection that producers' coÖperation and bolshevism have performed a great service. They have demonstrated, by the out-and-out elimination of the managing employer, that the laborer alone cannot carry on modern industry. Such actual demonstrations of the value of factors of production other than labor are of far more service in correcting the viewpoint of the socialist than is any amount of theoretical argument.

161. THEORY OF CLASS STRUGGLE UNWARRANTED.—The theory of class struggle is based upon the claim that the laborer produces all wealth. But we have seen this claim to be unfounded; therefore the theory of class struggle is built upon an error. Ultimately, the theory of class struggle tends to injure the very class which seeks to gain by advocating it, for true and permanent prosperity for the laboring class (as well as for all other classes) can result only when all of the factors of production work together harmoniously. Fundamentally the quarrel between capital and labor [Footnote: The phrase "capital and labor" is loose and inaccurate, but is in common use. Used in this sense the word "capital" refers to the capitalist and employing classes, while the word "labor" refers to the workers. See Section 181, Chapter XVIII, for a fuller discussion.] is as suicidal as though the arms of a human body refused to coÖperate with the other members. There are, indeed, many antagonisms between capital and labor, but socialism seeks to foment, rather than to eliminate them. Socialism preaches social solidarity and prosperity for all, but by inciting the class struggle it makes for class hatred and a disharmony between capital and labor which decreases prosperity and threatens economic ruin.

162. HISTORY HAS DISPROVED SOCIALISM.—Karl Marx bases his theory of a future socialist state upon a number of predictions, none of which has come true. According to Marx, socialism was inevitable. He declared that the centralization of wealth in the hands of the capitalists, on the one hand, and the increasing misery of the workers on the other, would accentuate the class struggle and bring about the downfall of capitalism. As a matter of fact, laws are more and more restricting the undue concentration of wealth in the hands of a few. The middle classes, far from disappearing, as Marx predicted, are increasing in numbers and in wealth. The working classes are not becoming poorer and more miserable, but are securing a larger and larger share of the joint income of industry.

The socialist revolution came in 1917, not in the most enlightened country in the world, as Marx had predicted, but in Russia, one of the most backward of civilized countries. This revolution did not demonstrate the superiority of socialism over capitalism, but revealed the fundamental weaknesses of socialism, and led to a more widespread recognition of the merits of the capitalistic system.

In the progressive countries of western Europe and America, the likelihood of a socialist revolution has been greatly diminished by two developments. These developments, both of which were unforeseen by Marx, are as follows: first, the improving condition of the workers has rendered socialist doctrine less appealing; second, the increasing effectiveness of legislation designed to remedy the defects of capitalism has caused attention to be directed to legislative reform rather than to socialism. With many who were formerly socialists, the supreme question has become, not how to destroy the present order, but how to aid in perfecting it by means of appropriate legislation.

163. SOCIALISM CLAIMS TOO MUCH.—Socialism often appeals strongly to people who are unable to distinguish between plans which are realizable and promises which cannot be fulfilled. For example, socialism promises greatly to increase the productive power of the nation, to shorten the hours of labor, and to insure a just distribution of wealth. These reforms, it is claimed, would be accompanied by the elimination of unemployment, poverty, vice, and attendant evils. It is maintained that socialism would encourage a higher moral tone and a healthier and more vigorous social life than now exist.

Without doubt these are desirable aims, but we must face the hard fact that socialism is not likely to attain them.. Some of the ills which socialism claims to be able to cure are neither attributable to capitalism, nor open to remedy by socialism. For example, crises and unemployment are often due to the alternations of good and bad harvests, to the varying degrees of severity in successive winters, to new mechanical inventions, and to changes in fashion. These forces are beyond the effective control of any state. This being so, it is unfair for socialists to attribute their evil effects to capitalism. It is likewise unwarranted that socialism should claim to be able effectively to control these forces.

Other industrial evils are due to the infirmities of human nature, and to the fact that we are a highly civilized people living more and more under urban conditions. Crime, vice, and disease are grave social problems which demand solution, but it is unfair for socialism to charge these evils against capitalism. Such defects are due partly to the fact that we are human, and partly to the fact that much of modern life is highly artificial. Unless socialism contemplates a return to small, primitive communities, there is nothing to indicate that it would be able materially to reduce crime, vice, nervous strain, or ill-health. Indeed, there is no evidence to show that socialism could make as effective headway against these evils as we are making under capitalism.

164. DEFECTS OF SOCIALISM OUTWEIGH ITS MERITS.—It is only after the advantages of a system or an institution have been carefully weighed against its disadvantages that its value appears. A socialist system would have some obvious merits. It might eliminate unemployment, since everyone would be an employee of the state, and, as such, would be guaranteed against discharge. Charitable aid would probably be extended to many people now left to their own resources.

But certainly socialism could not cure ills which are due either to natural causes, or to the infirmities of human nature. The abolition of private initiative and of private property would strike at the root of progress. Socialism would also probably give rise to a series of new problems, such as the evils arising out of a bureaucratic form of government. As its program now stands, it is probably fair to say that the defects of socialism greatly outweigh its merits.

165. SOCIALISM UNDER-RATES CAPITALISM.—The ardor of the socialist often causes him to underestimate the merits of capitalism, and to exaggerate its defects. The striking achievements of capitalism, so in contrast with the negative character of socialism, are not generally appreciated by the socialist. On the other hand, the socialist places an undue emphasis upon the defects of the present system. The radical agitator too often overlooks the millions of happy, prosperous homes in this and other countries; he too often sees capitalism in terms of poverty, crises, unemployment, vice, disease, and extravagance.

Our age is not to be despaired of. An age of progress is always an age of adaptation and of adjustment, and it is precisely because American democracy is both a progressive ideal and a living, growing institution that it is confronted with problems. The socialist indictment is not a prelude to chaos, for through the process of adjustment we are making steady progress in solving our problems. Capitalism has served us well, and though it has defects, these are clearly outweighed by its merits. So long as we know of no other system which would work better, we are justified in retaining capitalism.

166. NECESSITY OF A DEFINITE PROGRAM OF INDUSTRIAL REFORM.—Socialism appeals to certain types of people because it offers a confident program, even though it is a mistaken and probably a dangerous program. And it is the almost universal failure of non-socialists to advance a substitute program that is responsible for a large share of the resentment which industrial evils have aroused among non- socialists. If not socialism, what? is the cry. We are challenged to move, to do something, to present a reform program which will justify the rejection of socialism.

Lest our survey of industrial reform seem negative and devoid of constructive elements, therefore, the next chapter will be devoted to what may be called a democratic program of industrial reform. The basic idea of this program is that poverty is as unnecessary as malaria or yellow fever, and that we can abolish poverty without sacrificing private property, personal initiative, or any of the other institutions which we hold dear.

QUESTIONS ON THE TEXT

1. What are some of the administrative difficulties which would confront a socialist state?

2. Why would socialism tend to give rise to a bureaucratic government?

3. In what way does socialism run counter to human nature?

4. In what way does the socialist differ from the non-socialist in his attitude toward the principle of self-interest?

5. In what way is the socialist theory of distribution unsound?

6. Demonstrate the unsoundness of the labor theory of value, with reference to three classes of goods.

7. How may we explain the socialist's tendency to overestimate the importance of labor, and to underestimate the value of other factors of production?

8. Explain clearly the statement that "history has disproved socialism."

9. In what way does socialism claim too much?

10. Name some industrial evils which socialism probably could not cure.

11. What is meant by the statement that "socialism under-rates capitalism"?

12. Why is it necessary for non-socialists to advance a program of industrial reform?

REQUIRED READINGS

1. Williamson, Readings in American Democracy, chapter xvi.

Or all of the following:

2. Brasol, Socialism versus Civilization, chapter ii.

3. Bullock, Selected Readings in Economics, pages 681-705.

4. Ely, Outlines of Economics, chapter xxxi.

5. Le Rossignol, Orthodox Socialism, chapters viii and ix.

6. Skelton, Socialism, a Critical Analysis, chapter iii.

QUESTIONS ON THE REQUIRED READINGS

1. What is the "American conception of equality"? (Brasol, pages 75- 76.)

2. Why is the wage system a necessary feature of modern industrial life? (Brasol, page 93.)

3. What is the importance of the spirit of enterprise in increasing national wealth? (Brasol, page 99.)

4. What effect has the development of entrepreneur ability had upon the condition of the laboring classes? (Le Rossignol, pages 112-113.)

5. Could collective production be carried on in a democratic country? (Bullock, pages 682-683.)

6. Could socialism increase the productivity of the nation? (Bullock, pages 685-688.)

7. What are some of the difficulties which a socialist state would encounter in distributing wealth? (Bullock, pages 688-693.)

8. What difficulties would confront a socialist state in fixing wages? (Bullock, pages 696-705.)

9. What has been the effect of the Industrial Revolution upon the condition of the laboring classes? (Le Rossignol, pages 107-108.)

10. Explain why Marx's prediction of an increasing concentration of wealth in the hands of a few has not come true. (Le Rossignol, pages 128-130.)

11. To what extent is socialism too pessimistic about the present order? (Le Rossignol, page 138.)

12. To what extent does socialism overestimate industrial evils? (Skelton, page 53.)

13. What service has been rendered by socialism? (Ely, page 638.)

14. What, according to Skelton, is the fundamental error of socialism? (Skelton, pages 60-61.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. Make a list of a number of familiar commodities, and divide them into three classes for the purpose of testing the error of the labor theory of value, and the truth of the scarcity-utility theory. (Consult Section 159.)

2. Make a study of unemployment in your locality, with particular reference to unemployment due to

(a) climatic changes,

(b) changes in fashion,

(c) accidents, such as fire, flood or earthquake.

3. Interview an elderly friend or relative, with the purpose of securing a definite idea of the condition of the working classes a half century ago. Contrast with the condition of the laborers to-day.

4. Make a list of the notable inventions of the nineteenth century. To what extent has each increased the productivity and well-being of the various occupational groups in your community?

II

5. History of socialism. (Consult an encyclopedia.)

6. Varieties of socialism. (Ely, Outlines of Economics, chapter xxx.)

7. The Iron Law of wages. (Le Rossignol, Orthodox Socialism, chapter iii.)

8. The socialist's attitude toward industrial crises. (Le Rossignol, Orthodox Socialism, chapter vi.)

9. Objections to the socialist's attitude toward production. (Ely, Strength and Weakness of Socialism, part iii, chapter vi.)

10. Objections to socialism as a scheme of distribution. (Ely, Strength, and Weakness of Socialism, part iii, chapter viii.)

11. Socialism and American ideals. (Myers, Socialism and American Ideals.)

12. Social justice without socialism. (Clark, Social Justice without Socialism.)